Reddy Ice bonds better bid, quiet as company files for bankruptcy; MF Global debt also unfazed

By Stephanie N. Rotondo

Portland, Ore., April 12 - Distressed debt was again firmer on Thursday, traders reported.

"The market was better," a trader said. "All bonds were higher."

Reddy Ice Corp. made headlines again after the company announced that it had voluntarily filed for Chapter 11 protections. The filing was not all that surprising, as the market has been waiting for it since last week. However, the bonds were little traded, though quoted higher. One trader speculated that there was little action in the name because the bonds were potentially all locked up.

There was also news out on MF Global Futures Ltd. While paper was "better bid," according to a trader, there was also little action in that name.

The trader said he thought that was strange given the "substantial news" regarding the trustee's warning that it could start suing individuals of the defunct firm.

Also topical were Lehman Brothers Holdings Inc.'s debt. There was "heavy volume" in the name, a trader said, as investors continued to react to news out Wednesday regarding upcoming distribution payments.

Reddy Ice better bid

Reddy Ice announced Thursday that it had voluntarily filed a prepackaged bankruptcy filing "to complete its previously announced plan to strengthen its balance sheet and ensure strong financial footing for the future," the company said in a press release.

But the news did little to move the bonds, at least in terms of actual trades.

A trader said he saw 94 and 95 bids for the 11¼% notes due 2015 and 12 bids for the 13¼% notes due 2015.

"But it didn't really trade," he said, adding that it was "very weird.

"It just may be that they have all potentially traded bonds locked up," he said, noting that the plan had received about 94% of creditor approval.

The trader further noted that the plan calls for the senior paper to be reinstated, while the subordinated issues will be equitized.

Another trader saw the senior notes trading at 91½ bid, 93½ offered, trading flat, "which isn't bad."

He saw the sub piece at 13 bid, 15 offered, also flat, and the 10½% 2012 notes - only $11 million of those bonds are still outstanding - at 19 bid, 20 offered.

He said, "The company is doing the right thing" by reorganizing, but added that "nobody knows" if they still have a viable business model.

The Dallas-based ice maker has secured a $70 million debtor-in-possession facility from Macquarie Bank Ltd. The bank will also provide $50 million in exit financing.

The company expects to emerge from bankruptcy in 45 days or less.

Following news of the filing, Standard & Poor's downgraded the company's credit rating to D from CC.

MF Global quiet on news

MF Global's bonds were strangely quiet after it was reported that the trustee liquidating the defunct broker-dealer was considering bringing civil lawsuits against individual employees that might have been involved in improperly using client funds.

"I just don't think there are many sellers of that," a trader said. He added that there were not many trades in the 6¼%/7¼% notes due 2016, though paper was "better bid" at 371/2.

"I actually think that's pretty substantial news," he said, surprised that there was not more activity.

James Giddens, one of two trustees overseeing MF Global's case, said Thursday that he might sue certain "individuals" at the New York-based futures firm for breach of fiduciary duty and for violating rules governing the segregation of client funds.

Giddens did not cite specific names.

Lehman gets modest boost

A trader said Lehman Brothers' debt was moving up marginally as investors reacted to news out Wednesday regarding an upcoming distribution.

He said the bonds were trading at "30 and change" on "heavy volume."

Lehman Brothers said Wednesday that it would pay out $22.5 billion to creditors next week in its first distribution payment. The amount is more than double what was previously expected.

The payouts will begin April 17.

New York-based Lehman went under in September 2008.

Broad market gains again

With the broad market moving higher again on Thursday, so did many distressed issues.

One trader saw Caesars Entertainment Corp.'s 10% notes due 2018 gaining over a point to end at 75.

He also said Clear Channel Communications Inc. was firmer, the 10¾% notes due 2016 at 74 and the 11% notes due 2016 at 721/4.

Even Travelport LLC's 9 7/8% notes due 2014 were better, closing up 1 point to 631/2.

Not all debt was moving up, however.

A trader saw Hawker Beechcraft Acquisition Co.'s 8½% notes due 2015 falling to 103/4, while Bon-Ton Stores Inc.'s 10¼% notes due 2014 fell to an 831/2-83¾ context.

Paul Deckelman contributed to this article

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